Dividend paying gold mining companies with strong fundamentals
- These are the gold stocks to buy as the precious metal trends higher on dollar weakness.
- Newmont Mining (NEM): Steady production visibility also implies continued free cash flows.
- Barrick Gold (GOLD): Investment grade balance sheet with visibility for dividend growth.
- Kinross Gold (KGC): After Russian asset sale in 2022, this might be a year of potential acquisitions.
- AngloGold Ashanti (AU): Positioned for free cash flows of approximately $1 billion in 2023.
I would look at some of the best gold stocks to buy if I had to make a call on some attractive investment themes for 2023.
The U.S. dollar index peaked at 114.78 in September 2022. This was when the federal reserve was pursuing aggressive contractionary monetary policies. During this time, gold had also trended lower with high interest rates aimed at curbing inflation.
However, the dollar index currently trades at around 103 and has been trending lower. In general, a weak dollar is positive for precious metals. I believe that the dollar will continue to weaken in 2023. The reason is that the world is staring at a potential recession. In such a scenario, aggressive contractionary monetary policy seems unlikely. On the contrary, policymakers globally might shift to expansionary policies.
Some of the best gold stocks have been depressed last year for reasons explained. With the potential reversal in monetary policy, it’s a good time to look at some gold stocks to buy. In addition to the potential for capital gains, these gold stocks also offer an attractive dividend yield.
Let’s discuss four fundamentally strong gold stocks to buy for 2023 and beyond.
Newmont Corporation (NEM)
Newmont Corporation (NYSE:NEM) is among the top gold stocks to buy.
In the last 12 months, NEM stock has declined by 15%. This is understandable as the federal reserve pursued aggressive contractionary policies in 2022. The stock looks undervalued and is poised for a reversal rally.
Newmont has 96 million ounces of gold reserves. Additionally, the company has 68 million ounces of copper and silver reserves. With a robust reserve base, the company expects to sustain steady production in the coming years.
Newmont is also attractive considering the cash flow potential. Even with the depressed gold price, the company reported operating cash flow of $466 million for Q3 2022. If gold trades above $1,800 an ounce, the company is well-positioned to deliver annual operating cash flows in excess of $2 billion.
With an investment-grade balance sheet, Newmont is also positioned to make sustained investments and pursue potential acquisitions. A dividend yield of 4.2% also makes NEM stock attractive.
Barrick Gold (GOLD)
With the recovery in the gold price, Barrick Gold (NYSE:GOLD) stock has trended higher by 17% in the last six months. However, the 2.1% dividend yield stock remains attractive at current levels for long-term exposure.
Barrick Gold also has a strong asset base with 69 million ounces in proven and probable reserves. Last year, the company replaced its depletion of gold mineral reserves by 150%. Robust replacement on a sustained basis positions Barrick for steady cash flows in the coming decade.
For the first nine months of 2022, Barrick Gold reported a healthy operating cash flow of $2.7 billion. Assuming a scenario where gold trades around $2,000 an ounce, Barrick is likely to deliver OCF in excess of $4 billion.
Considering the cash flow potential, GOLD stock is an attractive dividend growth stock to consider. Barrick has an investment-grade balance sheet and ended Q3 2022 with cash and equivalents of $5.2 billion. This positions Barrick for aggressive exploration activity to further boost its proven reserves.
Kinross Gold (KGC)
Among the relatively smaller names, Kinross Gold (NYSE:KGC) stock looks attractive. Kinross had a difficult last year with the company selling Russian assets at a steep discount. This translated into a revision of production guidance for 2023 and beyond.
However, the worst seems to be over and KGC stock has already moved higher by 8% in the last month. I expect this uptrend to sustain with Kinross having guided for steady production for the next few years. The company has also guided for sustained free cash flows.
It’s also worth noting that Kinross reported a liquidity buffer of $2 billion as of Q3 2022. Strong financial flexibility implies that dividends are safe. Kinross is already pursuing a $450 million share buyback program.
I also believe that asset acquisition is likely considering a strong liquidity buffer and positive free cash flows. Any upward revision in the company’s production guidance can translate into a meaningful rally.
AngloGold Ashanti (AU)
AngloGold Ashanti (NYSE:AU) stock has been the best-performing gold stock in the last six months. During this period, the stock has surged by almost 52%. Even after the big rally, AU stock looks undervalued at a forward price-earnings ratio of 15.6. As gold trends higher, I expect the positive momentum to sustain.
One reason for the stock moving higher is the company’s focus on cost control. As an example, AngloGold reported an all-in-sustaining cost of $1,284 an ounce for Q3 2022 as compared to $1,362 an ounce in Q3 2021.
With gold trading at $1,840 an ounce, AngloGold is positioned for healthy cash flows. For the last quarter, the company reported free cash flow of $169 million. With a higher realized price, it’s likely that the annualized FCF will be around $1 billion.
AngloGold also has a quality balance sheet. As of Q3 2022, the company reported a gearing ratio of 0.41. With $2.5 billion in liquidity buffer, the company is well positioned to invest in exploration projects.
This post originally appeared at InvestorPlace.
On the date of publication, Faisal Humayun did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.